ASX:NZM
NZME Ltd
Investment Summary
The fund managers believe that NZME Ltd (NZM.ASX) holds significant upside potential, particularly in light of its recent developments. The share price rose 13% in September 2024 following a positive shift in market sentiment post-RBNZ's interest rate cut. NZME’s digital transformation is yielding impressive results with digital audio revenue increasing by 33% and digital subscriptions by 13%. The standout achievement was a 63% growth in OneRoof's digital listing revenue, which positions it as a strong competitor in the property portal market. Despite being viewed as an undervalued traditional media company, NZME trades at only ~4x FY25 EV/EBITA, signaling potential for future earnings growth as the economy recovers. Furthermore, in June 2024, the firm reported an 8% rise in share price, attributed to increasing radio market share and improved profitability for OneRoof. The fund managers suggest that long-term investors could find tremendous value in owning leading positions in both radio and property portals.
Commentary From The Managers
Spheria Asset Management
30 Sept 2024
$1.00
- NZME (NZM.ASX) share price rose 13% during the month, indicating growing market enthusiasm for NZ companies following the RBNZ’s interest rate cut.
- Continues to deliver on its digital transformation strategy with significant growth in digital audio revenue (33%) and digital subscription revenue (13%) in 1HCY24.
- OneRoof’s digital listing revenue grew by 63%, with a +70% increase in OneRoof listing upgrades contributing to positive earnings.
- The audience gap between OneRoof and the leading property platform has narrowed to just 10%, highlighting OneRoof's continued market share gain.
- The market may be undervaluing NZME, seen as an out-of-favor traditional media company amidst its successful transformation from print to digital (currently ~30% of revenue).
- NZME trades at approximately 4x FY25 EV/EBITA, with potential for improving earnings as the economy recovers.
- OneRoof is expected to experience structural growth, enhancing overall company prospects as the transition to digital continues.
Spheria Asset Management
30 June 2024
$0.89
- Spheria Asset Management notes that NZME (NZM.ASX) share price rose 8% in June despite no new company-specific news.
- The business delivered full year results in February with revenue down 5% due to a challenging advertising market.
- The rate of decline in revenue decelerated in 2H vs 1H (-3.7% vs -6.3% relative to the prior period).
- NZME achieved radio market share growth to 43.1%, the highest since measurements began in 2016.
- OneRoof, the 2nd largest property portal in New Zealand, generated profit for the first time in Q4 with revenue up 80% for the first two months of the new year.
- Cost growth was constrained to 3% as management remains aware of the tougher macro environment.
- While the short-term macro environment remains challenging, Spheria Asset Management believes there is tremendous long-term value in owning the leading radio and print business in New Zealand and the 2nd largest property portal.
- NZME is currently trading on 5x CY24 EV/EBIT.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.